Policy digest April 2012
A long-awaited overall scheme on economic restructuring was presented on April 19 to the National Assembly Standing Committee, with a focus on the restructuring of public investment and state-owned business groups and corporations.

* Economic restructuring solutions unveiled: A long-awaited overall scheme on economic restructuring was presented on April 19 to the National Assembly Standing Committee, with a focus on the restructuring of public investment and state-owned business groups and corporations.

As per the scheme, economic restructuring would be associated with reforming the existing growth models for higher effectiveness, productivity and competitiveness of the economy up to 2020.

The scheme aims to achieve five major goals: (i) constantly improving the effectiveness of social resources, raising labor productivity and the economy’s competitiveness, transforming the growth model of breadth into one of depth, and achieving an average growth rate of 7-8% during 2011-2020; (ii) maintaining the firm stability of the macro-economy with low inflation and strong macro-foundations, and assuring the national financial security; (iii) maintaining a reasonable balance among localities and regions nationwide on the basis of bringing into full play their local advantages; (iv) constantly elevating the development level of economic sectors and the whole economy, replacing low-tech and labor-intensive industries with hi-tech industries with high added value; and (v) forming a more rational and dynamic economic structure with higher competitiveness and growth potential, and achieving the socio-economic development targets set forth in the 2011-2020 socio-economic development strategy.

Out of the 13 groups of economic restructuring solutions, seven priority solutions would be implemented from now to 2015:

(i) Restructuring the system of credit institutions, focusing on commercial banks (under Prime Minister Decision No. 254/QD-TTg), in combination with continued curbing of inflation and stabilization of the macro-economy;

(ii) Restructuring state investments, addressing thinned-out and asynchronous investments, to raise their effectiveness; formulating and passing the Law on Public Investment, the Law on the State Budget (revised) and the Law on Public Procurements, with a view to assuring effective mobilization, allocation and use of state investment capital;

(iii) Restructuring state-owned enterprises, focusing on equitization of and withdrawal of state capital from all enterprises in which the State needs not hold 100% or dominant shares; issuing a regulation on information disclosure by state economic groups and corporations, urging these groups and corporations to work out and implement their own restructuring schemes according to approved development strategies and to operate under the market mechanism;

(iv) Revising relevant laws to form a more favorable legal environment for business, removing obstacles and annulling provisions no longer appropriate to the market mechanism and international economic integration rules;

(v) Revising laws providing for investment incentives and preferences, investment management decentralization and coordination, first of all the Investment Law and relevant tax laws, so as to raise more capital from the private sector and support priority industries and products;

(vi) Building and strengthening institutions and capacity for cooperation in regional economic development, vesting more powers for regional development steering committees, and mechanisms for coordination in economic development among localities in each region, revising master plans to associate regional economic restructuring with restructuring of industries and services;

(vii) Formulating and implementing national programs to support the development of such priority products as ships, electronic appliances, processed foods, agricultural machinery, rice, coffee, tea, etc., and improving the quality of private enterprises dealing in these products.

* State Bank to officially publicize banking information: More than 40 kinds of information will be provided and updated by the State Bank of Vietnam (SBV) on its website, according to SBV’s Circular No. 35/2011/TT-NHNN which took effect on April 1.

The public will be able to access the newest legal documents on monetary and banking activities, which will be publicized within two working days after their promulgation. Management policies and decisions of the SBV Governor will be disclosed within one working day after their issuance.

Hot news such as purchase, sale, merger, consolidation, bankruptcy, dissolution, revocation of licenses or administrative sanctions against violations of credit institutions will also be posted up within one day.

Monthly, SBV will update information on the ratio of non-performing loans to total loans, credit granted-to-capital raised ratio, prudential and adequacy ratios, medium- and long-term loans, etc.

* Temporary import for re-export regulations need revision: At a recent conference on 2012 tasks of the Anti-Smuggling and Trade Fraud Steering Committee, Deputy Prime Minister Hoang Trung Hai urged the adoption of special measures to combat the illegal export of minerals, petrol, oil, gold and foreign exchange and drastically respond to smuggling, counterfeit goods trading and trade frauds to protect domestic production.

Duong Van Can, Deputy General Director of Customs, expressed his concerns about poorly controlled temporary import of cigarettes, scraps and wastes, which are intended not for re-export or delayed in re-export. He also found the duration of 120 days (maximum 180 days in case of extension) for retention of temporarily imported goods in Vietnam too long and suggested a shorter period as well as adoption of measures to force re-export of these goods within the prescribed period.

An officer from the Hanoi Market Management Department warned about goods from regional countries bearing counterfeit European origin marks and urged enactment of stricter regulations to check the origin of imported goods, especially foods, and prevent alteration of their expiry date.

* Debt rescheduling, tax break proposed for businesses: On April 17, the Ho Chi Minh City Association of Young Entrepreneurs, the Chief Executive Officers (CEO) Club and representatives of nine commodity line associations proposed to the Prime Minister a number of measures to remove difficulties for their businesses.

They recommended lowering of the ceiling loan interest rate to 10-12%/year and prolongation of the debt payment deadline for between six and 12 months without overdue interest fines.

They expected the State Bank to promulgate soon specific criteria for rescheduling of debts for enterprises, especially owners of uncompleted real estate projects whose debts are due.

They also suggested a payment deadline prolongation or reduction of value-added tax and reduction of the corporate income tax rate from current 25% to 18-20%.

They urged the consideration and advance notification of tax break, if any, for the 2012-2013 business year to help their members maintain their business and production operations.

* Financial status, risks of state groups to be under tighter monitoring: Monitoring of state ownership representatives in state economic groups and corporations should be performed along with business administration but implementing the rights of these representatives should not involve too many agencies, said Dang Quyet Tien, deputy head of the Enterprise Finance Department of the Ministry of Finance.

He found it vital to apply an effective method of evaluating the real financial status and weighing potential financial risks of these groups and corporations.

Other experts also suggested regulations on management of state economic groups should take into account state ownership representation through an enterprise model (a state capital investment company). The establishment of a specialized state agency as the representative of state economic groups or corporations should be considered and quarterly and annual reports of these groups and corporations on their capital investments and earnings publicized. Therefore, they recommended amendments to and more specific guidance on Decree No. 101/2009/ND-CP on trial establishment, organization, operation and management of state economic groups.

* Industrial park licensing suspended until better regulations, planning: In furtherance of Prime Minister Directive No. 07/CT-TTg of March 2, 2012, on rectifying the management and raising the operation effectiveness of economic zones, industrial parks and complexes, the Ministry of Planning and Investment would stop licensing new zones and parks and evaluate the effectiveness of mechanisms and policies for their development, said Vu Dai Thang, director of the Economic Zone Management Department of the Ministry Planning and Investment, in an interview with the Vietnam Economic Times. The Ministry would then revise Decree No. 29/2008/ND-CP of March 14, 2008, to thoroughly address such issues as management decentralization and organization, environmental protection, infrastructure building and employee management.

The Ministry would evaluate the implementation of economic zone and industrial park master plans throughout the country before adjusting planning orientations through 2020 for Prime Minister approval.

The Ministry would also select some important economic zones for priority intensive investment based on a provisional set of criteria already submitted to Prime Minister for prompt application in 2012 and promote their role as a driving force in the economy.

The Ministry would specifically guide and monitor local administrations in resolutely handling industrial park projects which are ineffectively or unlawfully operating or delayed in infrastructure building, Thang said.-

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